Federal banking regulators raised the threshold requiring commercial real estate appraisals from $250,000 to $500,000 last week.
This action drew praise from the Independent Community Bankers of America (ICBA), which had advocated for the change.
“ICBA commends the federal banking regulators for helping to ease regulatory burdens on community banks by allowing more institutions to use evaluations instead of appraisals,” ICBA President and CEO Camden Fine said. “The higher thresholds better reflect the rising cost of commercial real estate in urban communities while providing much-needed alternatives in rural areas, where there is a shortage of licensed appraisers and often few comparable sales of similar properties.”
With the change, commercial real estate transactions valued at $500,000 or less will now require an evaluation. The evaluation can be conducted by bank staff, instead of an appraisal prepared by a licensed appraiser. The thresholds have not been updated in many years. ICBA says the new requirement will promote lending in local communities.
ICBA is also encouraging the agencies to extend the higher threshold for all real estate-related loans. It would also like to see the threshold for certain qualifying real estate-secured business loans increased from $1 million to $2 million.
ICBA said it will continue to work with regulators on amending other regulations that limit economic and job growth in local communities.